Part 5Loan Relationships
Chapter 7Group relief claims involving impaired or released consortium debts
364Introduction to Chapter
1
This Chapter applies if—
a
there is (or was) a relevant consortium creditor relationship (see subsection (2)), and
b
either—
i
an impairment loss is or has been brought into account for the purposes of this Part for any group accounting period by the creditor, or
ii
a debit in respect of a release of liability under the relationship is or has been so brought into account.
2
For the purposes of this Chapter a relationship is a relevant consortium creditor relationship if—
a
it is a creditor relationship of—
i
a company (the “member company”), which is a member of a consortium by which a consortium company is owned, or
ii
a company (a “group member”) which is a member of the same group of companies as the member company but is not itself a member of the consortium, and
b
the consortium company or, if that company is a holding company, a consortium company which is a subsidiary of that company is (or was) the debtor (the “debtor consortium company”).
3
The provisions of this Chapter—
a
reduce debits for impairment losses and release debits under relevant consortium creditor relationships where an amount surrendered as group relief by the consortium company is claimed by a member company or group member (see section 365),
b
provide for a corresponding reduction in credits in respect of such relationships where a reduction within paragraph (a) has occurred (see section 367),
c
reduce claims for group relief where debits within paragraph (a) for earlier group accounting periods exceed reductions within paragraph (b) (see section 368), and
d
provide for such claims to be carried forward where they exceed such debits (see section 369).
4
In this Chapter “release debit” means a debit in respect of a release of liability under a relevant consortium creditor relationship.
5
If section 403C of ICTA (amount of relief in consortium cases) applies, effect must be given to that section before effect is given to this Chapter.
6
Expressions defined in this section have the same meaning in the other provisions of this Chapter, and sections 370 and 371 also apply for the interpretation of this Chapter.
7
For the meaning of “impairment loss” see section 476(1).
365Reduction of impairment loss debits where group relief claimed
1
This section applies for any group accounting period for which there is a net consortium debit.
2
For the purposes of this Chapter there is a net consortium debit for a group accounting period if—
a
the total of the impairment losses and release debits brought into account for that period in respect of relevant consortium creditor relationships by—
i
the member company, and
ii
every group member,
exceeds
b
the total credits so brought into account by them in connection with debts owed by the companies which are the debtor consortium companies in respect of those relationships.
3
The net consortium debit is equal to that excess.
4
If there is a claim for that group accounting period by the member company or a group member for group relief in respect of an amount which may be surrendered as group relief by the debtor consortium companies, the debits brought into account in respect of the impairment losses and the release debits mentioned in subsection (2)(a) are reduced.
5
The amount of reduction in the case of each of the debits referred to in subsection (4) (“the relevant debits”) is calculated as follows.
Step 1
Find the total amount which—
a
may be surrendered as group relief by the debtor consortium companies, and
b
is claimed as group relief for the group accounting period by the member company or any group member.
Step 2
If the amount found at Step 1 does not exceed the net consortium debit, apportion the amount found at Step 1 between the relevant debits in proportion to their respective amounts.
If the amount found at Step 1 exceeds the net consortium debit, apportion so much of the amount found at Step 1 as does not exceed it between the relevant debits in proportion to their respective amounts.
6
This section is subject to section 366.
366Effect where credit for release brought into account on amortised cost basis
1
This section applies if—
a
a company releases liability under a relevant consortium creditor relationship of the company (“the release amount”), and
b
the debtor consortium company brings into account an amount in respect of the release for any accounting period in accordance with an amortised cost basis of accounting.
2
An amount equal to the release amount is treated for the purposes of this Chapter as not being a debit brought into account for that period in relation to the relevant consortium creditor relationship.
367Reduction of credits exceeding impairment losses
1
This section applies if, apart from this section, for any group accounting period—
a
the total of the impairment losses and release debits brought into account for that period in respect of relevant consortium creditor relationships by—
i
the member company, and
ii
every group member,
is less than
b
the total credits so brought into account by them in connection with debts owed by the companies which are the debtor consortium companies in respect of those relationships.
2
Those credits are reduced (but not below nil) in accordance with subsection (3).
3
The amount of reduction in the case of each credit is calculated as follows.
Step 1
Find the total amount by which the debits in respect of the relationships for previous group accounting periods have been reduced under section 365(4).
Step 2
Deduct the total amount by which credits have previously been reduced under this section from the amount found at Step 1.
Step 3
Apportion the amount found at Step 2 between the credits in proportion to their respective amounts.
368Reduction of claims where there are earlier net consortium debits
1
This section applies if—
a
for any group accounting period there is a claim by the member company or a group member for group relief in respect of an amount which may be surrendered as group relief by debtor consortium companies, and
b
the total amount of the net consortium debits for earlier group accounting periods in respect of the relevant consortium creditor relationships exceeds any reductions in respect of those debits falling to be made under section 365(4).
2
In this section that excess is referred to as “the unreduced debits amount”.
3
If—
a
the claim is the only claim for that period, and
b
it exceeds the unreduced debits amount,
the claim is reduced by the unreduced debits amount.
4
If—
a
the claim is not the only claim for that period, and
b
the total of the claims exceeds the unreduced debits amount,
the claim is reduced by the same proportion of the unreduced debits amount as the claim bears to that total.
5
In any other case, the claim is reduced to nil.
369Carry forward of claims where there are no net consortium debits
1
This section applies if for any group accounting period there is—
a
a claim by the member company or a group member for group relief in respect of an amount which may be surrendered as group relief by debtor consortium companies (as reduced under section 368, if it applies), and
b
no net consortium debit in respect of the relevant consortium creditor relationships.
2
The claim (as so reduced) is carried forward and treated for the purposes of section 365—
a
as increasing any such claim for group relief made by the claimant company for its next accounting period, or
b
if apart from this subsection there would be no such claim, as being such a claim.
370Group accounting periods
1
In this Chapter “group accounting period” means—
a
any accounting period of the member company beginning on or after 1 October 2002, or
b
any accounting period of a group member which—
i
begins on or after that date, and
ii
corresponds to such an accounting period of the member company.
2
Any such accounting period of the member company and any such corresponding accounting periods of group members are treated for the purposes of this Chapter as being the same accounting period.
3
For the purposes of this Chapter an accounting period of a group member corresponds to an accounting period of the member company if condition A, B or C is met.
4
Condition A is that the periods coincide.
5
Condition B is that the accounting period of the member company includes more than half of the accounting period of the group member.
6
Condition C is that—
a
the accounting period of the member company includes part of the accounting period of the group member, and
b
the remainder of that period is not within any accounting period of the member company.
371Interpretation
1
In this Chapter—
“consortium company” means a company within section 402(3)(a), (b) or (c) of ICTA (surrender of relief between members of consortia),
“debtor consortium company” has the same meaning as in section 364 (see section 364(2)),
“group accounting period” is to be read in accordance with section 370,
“group member” has the same meaning as in section 364 (see section 364(2)),
“group relief” has the meaning given by section 402(1) of ICTA,
“holding company” means a company within section 402(3)(c) of ICTA,
“member”, in relation to a consortium, has the same meaning as in Chapter 4 of Part 10 of ICTA (group relief),
“member company” has the same meaning as in section 364 (see section 364(2)),
“net consortium debit” is to be read in accordance with section 365(2) and (3),
“relevant consortium creditor relationship” is to be read in accordance with section 364(2), and
“subsidiary”, in relation to a company which is a holding company, means a company which is within section 402(3)(b) of ICTA by reference to that holding company.
2
Any reference in this Chapter to a company being owned by a consortium is to be read in accordance with section 413(6) of ICTA.
3
Any reference in this Chapter to two companies being members of the same group of companies is a reference to those companies being members of the same group of companies for the purposes of Chapter 4 of Part 10 of ICTA (group relief) (see section 413(3)(a) of that Act).